Easing cost-of-living concerns sees increase in consumer confidence

Despite gains, confidence remains below the long-term average

'Positive momentum in Irish consumer sentiment suggests the possibility of an uplift in consumer spending in the second half of the year.' Picture: Gareth Chaney/ Collins

Irish consumer confidence improved to its best levels in two and a half years during the month of July as the economic outlook remained resilient and concerns around the cost of living begin to ease, the latest Credit Union Consumer Sentiment Survey shows.

The survey shows a sentiment index reading of 74.9 for July — up from 70.5 in June. Two solid monthly increases in June and July have been sufficient to bring Irish consumer sentiment to its strongest level since January 2022.

In an analysis of the survey, economist Austin Hughes said the results suggested Irish consumers are “cautious” but concentrating “less on downside risks to the economy and household finances”.

He said the overall tone of the July sentiment survey suggests “Irish consumers are a little less worried about the economic outlook and a little less strained in their household finances”.

“However, the current index reading is still below the sentiment survey’s long-term series average of 84.4, which implies that, despite a recent improvement, many Irish consumers are still burdened by significant concerns and financial costs,” he said.

The survey noted there was a strong pick-up in consumer spending plans, which likely reflects some seasonal effects related to holiday outlays — perhaps boosted by a desire to escape disappointing weather.

“Our sense is that significant price discounting in summer sales after what has been a fairly weak first six months of 2024 for retailers may also have boosted the buying climate element of the survey,” Mr Hughes said.

The improving spending plans come as inflation continues to ease and real wage growth starts to take hold. In addition, there is also the prospect of further interest rate cuts from the European Central Bank to come before the year is out.

Economist Austin Hughes said Irish consumers seemed to be 'less worried' about the economic outlook and are 'less strained' when it comes to their household finances. 

Mr Hughes cautioned that the “positive momentum in Irish consumer sentiment” could be fragile.

“If the recent improvement is sustained, it suggests the possibility of an uplift in consumer spending in the second half of the year,” Mr Hughes said.

The survey also showed further improvements in consumers’ assessments of their personal financial circumstances during July.

Mr Hughes cited official data which showed food and energy prices both fell month-on-month in June while EU data suggested petrol and heating oil costs continued to edge lower.

However, there was a more “muted improvement” in the outlook for people’s household finances, with “no wild expectations” for a large-scale giveaway budget later in the year, according to Mr Hughes.

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While the survey showed Irish consumer thinking on the outlook for jobs improved as of late, a smaller gain may have reflected mixed news on the employment front.

In July, the IDA published its annual report which found softer employment trends in the multinational sector. In addition, job cuts were announced in AIB as well as Becton Dickinson in Drogheda.

In contrast, there were a number of new job announcements, with official data showing ongoing employment gains and income tax receipts, which suggest the jobs market remains robust.

The survey was conducted in partnership with Core Research involving 1,000 Irish adults.